Going electric – what’s the cost?

posted on 30/10/2023
  • Overview
  • Total Cost of Ownership (TCO) explained
  • Total Cost of Ownership for EVs

If you’re thinking about going electric, you probably have a list of burning questions. But we’re willing to bet running costs is one of the first that comes to mind. So, here’s our comprehensive guide to everything you need to know about the ongoing expense of owning an electric vehicle (EV). 

See below for some common questions on running costs, as well as our explanation of Total Cost of Ownership.

Total Cost of Ownership (TCO) explained 

Many people will look at the perceived ‘premium price tag’ of EVs and be put off. But that’s normally because they’re only looking at the upfront purchase or lease costs compared to petrol or diesel vehicles – and these are not the only costs to consider. As with any vehicle, once you’ve got it on the road, there are other expenses you need to pay to keep it running. That’s why it’s best to calculate how much a vehicle will cost you in fuel, servicing, tax, insurance and more. This TCO, sometimes also known as the ‘whole life cost’ (WLC) of the vehicle, helps you make sure your choice is the most cost-effective one.  

Depreciation is a key factor if you’re buying brand-new. However, TCO for EVs is consistently dipping below that of petrol and diesel internal combustion engine (ICE) alternatives. This is driven mainly by lower energy costs, which quickly add up to significant monthly savings. As the upfront costs of EVs continue to move closer to their ICE rivals, this TCO advantage looks set to improve further. 

Here's a handy calculator that can do all this for you. 

Simply put, once you’ve added all these direct and indirect costs up to a single figure, you’ll be in a much better position to compare different types of vehicles. This will help find the best fit for your budget. And when it comes to EVs, you’ll often find they work out cheaper over a lifetime. That’s because EVs come with key cost differences to measure due to their build, tax implications and incentives, which we’ll cover next. 

Vehicle Excise Duty (VED) – more commonly known as road tax – is a tax levied on every vehicle using UK public roads. It’s collected by the Driver and Vehicle Licensing Agency (DVLA).  

For most cars registered before April 2017, the amount of VED due depends primarily on the car’s official CO₂ emissions. For cars registered from April 2017 onwards, first-year VED payments are related to CO₂ emissions, but subsequent payments are not. 

While they’re currently exempt, EVs and zero emission vehicles will start paying VED from April 2025 onwards. It’s worth noting that first-year VED of Ultra Low Emission Vehicles (ULEVs) is considerably lower than many petrol and diesel vehicles. The current forecast is around £284 per household. They’ll also become eligible for the expensive vehicle supplement at the same time. 

Benefit-in-Kind (BIK) is the tax paid on benefits that you as an employee receive from your company, which aren't already included in your salary or wages. This means company vehicles, including those provided under a salary sacrifice scheme, are liable for BIK tax.  

How much BIK tax you pay depends on how much CO₂ the vehicle emits. The higher the CO₂ output, the higher the percentage you’ll have to pay. For EVs, this amount is very low at just 2%, rising to 3% for the tax year 2025/26. This is good news – switching from a petrol or diesel vehicle can help you save big, and it can also lower Class 1A National Insurance Contributions (NIC) for your employer. Together, they can reduce the cost of an EV lease significantly. For example, if you are on the 20% UK tax rate, every £100 of monthly lease saves £20 in tax and £12 in National Insurance every month. That’s a saving of around a third of the monthly cost overall. Couple this with the low energy costs and you end up with a significantly lower TCO, compared to a petrol or diesel equivalent. 

Want to compare the tax on specific vehicles? Give our handy BIK calculator a try. 

For ICE vehicles, it’s well-known that fuel stations on motorways are more expensive than their equivalents in towns or at supermarkets. For EVs, there are many more variables to consider. 

If you are lucky enough to be able to charge at home, you can take advantage of smart tariffs that cost a fraction of the regular energy cost. This could be as low as 9p/kWh, while a fast charger on a motorway could be as high as 75p/kWh. This makes calculating journey costs tricky. Tools like Zapmap are invaluable in choosing the right charger, as they detail the price of a charger, as well as location and availability. 

Also, while ICE vehicles are often graded on miles per gallon (mpg), EVs are judged on miles per kilowatt. Currently, anything above 4 miles per kWh is considered pretty good. If you drove an EV with a 60kWh battery, an efficiency of 3 miles per kWh would give you a range of 180 miles, while 4 miles per kWh would improve that to 240 miles. That’s pretty significant. So, how people drive can make a notable difference to how far they can go. Eco modes limit motor power and extend range, while limiting air conditioning use can also offer a surprising increase in range. 

One major change often noted by EV drivers is an increase in journey planning. For example, if you’re taking a trip that starts and finishes at home and is just within the range your vehicle can achieve, it pays to plan ahead by fully charging the vehicle at home, then recharging on your return. That way, you benefit from cheap charging rates, and your trip is as cheap as it can be. For longer journeys where an interim charge is necessary, planning a route in advance is essential. Do you want to stop and rapid charge, or do you have time to use a slower charger for longer and pay less? By limiting rapid charging use, you’ll make running an EV even cheaper, while also benefitting long-term battery health in the process. 

Nonetheless, with the price of fuel rising, it’s often more expensive for even the most efficient of ICE vehicles per mile, when compared to an inefficient EV. You can see a breakdown in costs here. 

If you’re ready to begin your electric journey, get in touch with our team to learn more about the costs and savings when making the switch. The Road to Zero starts here! 

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